How Business Expenses Work
As a freelancer or consultant, business expenses reduce your net profit on Schedule C. Lower profit means less income tax and less self-employment tax (15.3%). Every legitimate business expense saves you money on both.
Common Deductible Expenses
Home Office
If you use a dedicated space in your home regularly and exclusively for business, you can deduct it.
| Method | How it works | Max deduction |
|---|---|---|
| Simplified | $5 per square foot | $1,500 (300 sq ft max) |
| Actual | Percentage of mortgage/rent, utilities, insurance | No cap |
Tip
The simplified method is easier and requires no receipts for home expenses. For most home offices under 300 sq ft, it's the practical choice.
Computer, Software, and Equipment
Laptops, monitors, software subscriptions (Adobe, Figma, GitHub, etc.), phones used for business, and office furniture are all deductible. If an item is used for both personal and business, deduct only the business percentage.
Professional Development
Conferences, courses, certifications, books, and industry memberships directly related to your business are deductible.
Health Insurance (Form 7206)
If you're self-employed and not eligible for employer-sponsored coverage through a spouse's job, you can deduct 100% of health, dental, and long-term care insurance premiums as an above-the-line deduction.
Vehicle Expenses
If you drive for business (client meetings, site visits), choose one method:
| Method | 2025 Rate | Best for |
|---|---|---|
| Standard mileage | $0.70 per mile | Most people |
| Actual expenses | Track gas, insurance, repairs, depreciation | High-cost vehicles |
Keep a mileage log — the IRS requires documentation of business miles.
Other Common Expenses
- Internet and phone (business percentage)
- Office supplies and postage
- Professional services (accounting, legal)
- Liability insurance
- Marketing and advertising
- Bank fees on business accounts